Trading Tough for the UK Big Boxes

From recent news in the UK, the tough economic conditions appear to be hitting the technology and electrical particularly hard with Best Buy and Comet in the front line.

After losing nearly £50 million in the last six months, Best Buy is going to close all 11 stores in the UK after just 18 months in operation. Best Buy Europe was a joint venture between Best Buy, Inc and Carphone Warehouse, with Best Buy purchasing half of Carphone Warehouse’s retail division for over $1 billion. Over 200 stores were originally planned but now 1,000 jobs are at risk.

Roger Taylor, CEO of Carphone Warehouse said, “The eleven Best Buy UK ‘Big Box’ stores have performed exceptionally at the level of customer satisfaction, but they do not have the national reach to achieve scale and brand economies. Due to the lack of visibility of an acceptable rate of return on historical and future potential investment we have decided against rolling out more ‘Big Box’ stores and we will be closing our existing stores, subject to consultation with our employees. Our immediate focus is our people and we are confident that the large majority will be offered alternative positions elsewhere in our UK business.”

Today, Comet has been sold for just £2 to a holding company “Hailey” after revenue in Comet fell 22% over the summer. A further £50 million will be invested by Comet’s parent company in the holding company. 17 stores are already earmarked for closure with a further nine to be reduced in size.

In guarded comments, Bob Darke, Comet managing director said, “We are encouraged by today’s announcement and – with shareholder approval – absolutely committed to a smooth handover. For our customers and our people, it is business as usual and we are 100 per cent focused on delivering a successful Christmas trading period and great business performance into 2012 and beyond.”

DSG Retail with its Dixons, Currys and PC World brands is the main player in the UK market but even it saw a fall of 7% earlier in the year. The next set of results isn’t due for a few months and it will be interesting to see what they show.